Going Higher

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I don’t know if this is just a bounce or a new leg to the rally. But we’re going up, folks.

The EURUSD is back near 1.275, after bleeding below 1.27 earlier. The collapse of the euro has been the driving force of the move in oil and the correction in the markets. That’s it; the big mystery. The oil glut, the game of “guess demand whack-o-mole”, the sudden fear – nothing next to the euro.

The other excuses being provided are just not that relevant. The data is fine. Demand is shifting around and notoriously sluggish but altogether fine also. Jobs creation is slow, but fine. There’s no real data even reflecting the fears of observers on display yet.

But the euro is an undertow and its move from above 1.4 to below 1.27 did damage. It strengthened the dollar considerably and sent trade out of balance.

With the euro firming up a bit, it’s going to help take some of the edge off. For as long as the EURUSD is lifting I am constructive on stocks and commodities.

Monetary Policy Remains Overwhelmingly Accommodative (And Outlook)

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The fed decision to test the waters with a taper while I was away did surprise me, somewhat. Yet it did not phase me much and so I elected to remain on vacation, silent on the issue.

I would state now in hindsight that a $5B per month taper (with as much as another $5-10B in the works) would still put the Federal Reserve on path to add another ~$800B to its balance sheet in 2014. This remains colossal and would have the Fed assets outstanding at just under $5 Trillion by 2015.

They may very well have tapered by $5B/month just because they were running out of things to buy…(laughter)

If I were to state things that concern me as potential impediments to the US economy and growth, they would list (1) consumer slowdown from budget impacts (pension, healthcare costs, rents/mortgage, increased retirement contributions, etc), (2) foreign existential shocks (EU breakup, Asian crisis, similar collapse that disrupts foreign trade) – where exactly did the EU government debt go and why is it now suddenly not an issue? Who is buying it (ECB, Fed, banking scheme, inter-government trade imbalances, etc)? And what stops non-payment concerns from popping up again in the future? and (3) the election of a Republican majority

But banking solvency just isn’t on that list right now. Neither is inflation, really, although long term prospects of an uncontrollable outbreak of inflation remains a viable possibility. With credit expansion in this country limited to growth of government balance sheets, deflationary pressure is set to commence…until it doesn’t. In the meantime, another ~$1 Trillion of free money to those closest to the trough will keep a major disruption of financial assets here at home as a low probability outcome. Of course, this bodes ill for the “wealth equality” lot, but they’re too dumb to call the system out on that, so we maintain the course.

Concerns aside, I am optimistic. Recessions don’t last forever, and my concerns are outweighed by hope in outlook. I am very long (no margin) and prepared to reap the rewards of economic growth. It’s been almost six years; the system has been on a hyperactive outlook for problems which greatly reduces the likelihood that a real “Black Swan” manages to crop up. It could still happen of course, but with hundreds of thousands of financial professionals calling bubbles as quickly as problems crop up, and a full time central banking staff armed with an unlimited supply of money attacking them at first sight, how exactly is a crisis supposed to materialize from all of this?

The only room for crisis in the US is rampant commodity/asset appreciation, which remains benign. That or an elsewise major shock to the consumer. Financial assets and liquidity issues are covered.

Now, that being said, historically we haven’t had a period longer than 10 years without a recession since at least 1789 (and probably not since long before that either – I just lack records to verify a more robust claim). I’d say the expectation of a correction since the Great Depression is 5-10 years with occasional 1-3 year shocks intermittently. We’re past the small shocks phase, which would put the expectation at right about where we’re at.

These times are unprecedented and the support the Fed is willing to lend the markets (unlike any time in recorded history) makes me think we blow through the averages. I want to say this ship will have the wind to sail to years seven, eight or nine, uninterrupted. We may even match the record holder of 10 or above.

However, it would be foolhardy to doubt another recession will most likely crop up before 2020. The ever growing levels of margin debt to buy equities may well be the first sign of the beginning of the final run before that. Of course it could be nothing.

My belief then is that a long commitment remains the way to go. I have been positively surprised by recent developments that have overridden prior comments on wanting to have a larger cash position by about this time (end of 2013) that I made late last year. However, as gains are taken, a portion should begun to be set aside, starting sometime mid 2014 to early 2015. This should create a reserve build-up of steadily marching intervals (10-20%, with a 1-2% increase every month topping out at around 40-50% of ones account value) sometime around late 2015 to early 2016.

At such time, a second hard look should be had. Earlier and exceptional strength should trigger a reassessment of these statements. Casual to quality growth does not necessarily change them. A major weakness (such as a shock of a GOP majority and fear of monetary policy interference) of course may necessitate a sudden course change.

My most hated places to invest are land/real estate (excluding multifamily or renting derived), oil companies (excluding natural gas predominated), and retail (excluding facilitation to the ultra-rich).

My favorite places center around natural gas production expansion, uranium, coal, multifamily REITs, and I remain interested in holding physical precious metals in a full position in the event an inflation shock from significant expansion in credit hits the economy.

I’m indifferent to the insurance market – especially health insurance. It could swing either way; they crawled into bed with the devil so it’s all political at this point. On the one hand, the entire market is shifting in wild and unpredictable ways. On the other, the feds are rigging the game in the insurance companies favor. Just stay away.

Sure Let’s Default. I’m All In

990 views

Alright, it seems like the benevolent Tea Part folk have decided to share their complete inability to grasp simple concepts with the world, by forced contrition on the populace. It is time to eat our peas. Following the line of Obama’s hatred for those damn jet plane flying 1%-ers, the Tea Party have chosen to one up him, by destroying the 1% in its entirety. An unfortunate and slight side effect may be to destroy the other 99% of the country in the process, but hey…sometimes sacrifices must be born for the good of everyone. So making moves for the ill of everyone is the only logical course of action.

In an attempt to honor Argentina’s dim witted socialist president Fernández de Kirchner for her blood clot, the Tea Party have magnanimously extended a show of us revisiting that countries darkest moment, a point from which it has never recovered: elective default.

Remember that one time the global economy nearly collapsed because a single line of business for US banks bet large sums of money that non-creditworthy citizens would default at abnormally low rates in exchange for paper thin margins on those loans?

Well the entire global economy and all of finance has bet gargantuan sums of money that this non-creditworthy country will never default for no fucking margins.

By all means, how do you think this ends?

Frankly, I don’t care anymore, and am all in. Lay your neck under the axe, and taunt these pussies with all your hatred. See if they have the sack to swing.

What’s the alternative? You can turn all short doubling your money with the end of civilization, just in time to burn it to stay warm? You can barter that paper desperately for some precious metals that aren’t for sale? You can get shot by rioters and have it taken off your corpse?

Because if we actually default, it’ll be to late to go out and prepare. Just think of all the mechanisms that are tied to treasuries. There will be bank failures. And a slow, agonizing process as US spending on interest careens towards $1 trillion annually.

In the meantime, staying in our means would require we basically slash in half one of the following:

The entire defense budget OR
The entire non-defense budget

The point of the matter is that if we default, this place is going to get so screwed up anyway, what does it matter? At some point if the decision were not reversed, the man you know as Cain Hammond Thaler would simply cease to exist. His 9th floor office would be deserted; the only clue that he was ever there at all being an empty safe that used to house his silver and firearms and row upon row of cleaned out bookshelves.

I would simply take up my favorite pocket watch and walking stick, and slip away into the night…never to be heard from again.

Pure Lunacy In The Eurozone

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This morning, Italy announced they are now in the 8th consecutive quarter of economic decline. Do you understand how crazy that is?

In the 9th floor, a cool air drafts around my slippers, sneaking in to touch my feet. The black tea in my mug gives off a warmth to the touch, and the paper between my fingers stains the skin lightly. Dim shadows from the clouds outside the windows provides the need for a lamp on the side table that casts humming of electricity, while I read.

Italy, and all of the EU, are subjecting themselves to needless pain, just so that some dim witted economists and politicians from the 90’s can continue to enjoy the benefits of a legacy!

The thread that holds the eurozone together has slipped and is now strangling the wearer. But these fools won’t cut themselves free from some misplaced fear of tattering the shirt!

Fine; they’ve chosen their coffin. Do you believe, dear man reading over my shoulder, that we are near a bottom, just because numbers came in “better than expected”? Wrong!

These policy wonks have been calling for a bottom, always two quarters out, for two consecutive years now. They fail because they fail to grasp the intricacies of the problem. The debt maturities are breaking against the wall. Each crest that is survived simply marks a trivial point before the next wall of water raises up.

There’s one path for Europa, and that is the destruction of the euro. They may dismantle the debt instruments directing it, or they may dilute it directly. Their cheap side games are distracting from the main choice at hand, which is that the continent cannot survive if it allows itself to be dragged beneath the surface, anchored by the stubborness of those that created this mess in the first place.

As we are now almost three years past the start of the EZ crisis, my fears of Europe derailing US markets is on soft footing. However, even if America should rise above our distant cousins, and leave us sitting, as here in my office, watching curiously as distant spectators, my sympathies for what our brothers are being wrongly subjugated to stand.

There is no reason that a quarter of Spain should be sitting idle. There is no reason that almost a fifth of Portugal should be in despair. There is no reason that over half of Greek youth should be permitted to sink into shambles of anarchy.

There is no reason for any of this, other than the pride of a few.

Bitcoin Fanatics: You’re On Notice

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After seizing the largest Bitcoin exchange’s assets just earlier this month, the Fed’s have now taken down the largest e-currency exchange on the planet, Liberty Reserve.

Read here:

(AP) The U.S. Secret Service have arrested five individuals and seized multiple bank accounts related to a $6 billion money laundering scheme being described by authorities as “staggering” and the largest ever case of international money-laundering.

In a statement, Secret Service officials said authorities in Spain, Costa Rica and New York arrested five people on Friday and seized bank accounts and Internet domains associated with the company Liberty Reserve – a Costa Rica-based website that deals in digital currency and allows transnational online payments and money transfers.

According to the statement from the Secret Service, Liberty Reserve had approximately one million users worldwide with more than 200,000 users in the United States. Overall, the company processed an estimated 55 million separate financial transactions and is believed to have laundered more than $6 billion in criminal proceeds.

Read the description of what Liberty Reserve was, ever so carefully, and then tell me, where is the line between money laundering and creating a currency not sanctioned by a global government?

Don’t answer that; because there isn’t one.

This isn’t some kind of legal game, kids, where the US plays nice with you in court. Take a close look, and realize the the US government treats serial killers, pedophiles, and rapists better than it treats anyone even coming close to impeding the status and legitimacy of the dollar.

Walk into a school and open fire on packs of school children, and you will receive more sympathy from a federal prosecutor than you could ever hope to get from messing around in electronic currencies.

Keep in mind, the feds don’t need to stop you from trading crappy hair cuts for help siding your house. That sort of black market behavior is everywhere all the time. But by forcing compensation in national currencies, that largely clear through a handful of major banks, the current fractional reserve system has given undo and excessive control of the national economy and financial opportunity into a concentrated process – and they aim to keep it that way.

Your Bitcoins have roughly the same dynamics as common IOU’s between friends, because any major attempt to link them into the current financial systems will be met with felony charges and people’s lives getting destroyed. The liquidity premium everyone’s hoping for with these e-currencies will be strangled to death every time it surfaces.

Your One And Only Warning Concerning Bitcoins

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Sipping on the edge of the liquid pooled in this glass, my eyes slip out of focus. And as the 9th floor fades from view, an unclear image is left. It is a premonition – perhaps call it instinct – of what is going to happen if bitcoins continue to gain popularity.

I should say that I see only one way this prevision does not come to pass; if the bitcoin was created by the US government, for some probably lunatic reason, like social experimentation, or beta testing taking the dollar virtual.

Shy of that, those of you buying these little wayward programs are pretty screwed.

I will remind you:

March 18, 2011

STATESVILLE, NC—Bernard von NotHaus, 67, was convicted today by a federal jury of making, possessing, and selling his own coins, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina. Following an eight-day trial and less than two hours of deliberation, von NotHaus, the founder and monetary architect of a currency known as the Liberty Dollar, was found guilty by a jury in Statesville, North Carolina, of making coins resembling and similar to United States coins; of issuing, passing, selling, and possessing Liberty Dollar coins; of issuing and passing Liberty Dollar coins intended for use as current money; and of conspiracy against the United States.

This is what is waiting for you at the end of that tunnel. Whoever the central players are in this game, when the FBI finally becomes aware of it, you are lamb fodder.

Von NotHaus, who remains free on bond, faces a sentence of up to 15 years’ imprisonment on count two of the indictment and a fine of not more than $250,000. Von NotHaus faces a prison sentence of five years and fines of $250,000 on both counts one and three. In addition, the United States is seeking the forfeiture of approximately 16,000 pounds of Liberty Dollar coins and precious metals, currently valued at nearly $7 million. The forfeiture trial, which began today before United States District Court Judge Richard Voorhees, will resume on April 4, 2011 in the federal courthouse in Statesville. Judge Voorhees has not yet set a date for the sentencing of von NotHaus.

Do you think the US government is going to play fair with you? That they’ll just sit by and watch as you play games with their status as the global reserve currency, all because you started doing the same thing with some MP3 files back in the 90’s?

Think again, friend.

“Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism,” U.S. Attorney Tompkins said in announcing the verdict

_____________________________________

I will provide some background here for those of you who aren’t familiar with me. I am not a government advocate, nor do I particularly like that the US political system has control of something as important as the measurement stick of over half of all financial transactions occurring on planet Earth.

I especially dislike that this position allows clowns-in-suits like US Congressmen, government agency employees, State officials, municipalities, banks, people in unique positions of influence, friends of the aforementioned, random con artists,….a half dozen others…to engage in the wildest stupidities at the fringe of their imaginations without immediate and dire consequences.

And I don’t exactly respect the government for its ability to pass, implement, and enforce laws. In fact, I generally get a kick out of most non-violent, non-harmful crime. Example: a guy who owns a fully automatic weapon and regularly posts videos of himself shooting it online.

Hilarious. No one gets hurt. It’s in mock contempt of a half dozen laws. And there’s nothing the government can do about it. Tracking him down would be prohibitively expensive, especially considering that he isn’t actually doing anything.

Another example: buzz sawing cattails. Know what cattails are? Weeds, mostly. But they are apparently sacred weeds, as cutting them down gets the DNR and EPA driving 3 year prison sentencing down your throat if they catch you. Amazingly, that never really stops anyone.

But just because the US government is totally inept at catching most forms of “crime” (and equally bad at conveying what constitutes legitimate need for criminal statuses in the first place…), that shouldn’t trick you into thinking you can get away with anything.

In fact, the US government is an enormous trillion dollar organization, and that’s quite a bit of firepower to have coming your way if you happen to be doing one of the things the government absolutely-will-not-tolerate you doing.

________________________________

Now that I’ve explained that, let me point out why bitcoin is such a serious threat to the US government.

First, the US government is completely reliant on its status as the global reserve currency to fund its deficit. Any assault to that status is an immediate game changer as it is, as it would force the US to spend within tax receipts, or else suffer real, actual consequences.

We get away with printing because it all ends up over seas, in accounts, or traded for bonds.

Second, because of the peer to peer method, if left unattended, tax receipts along with most trade reporting would drop off the map. Not from corporations. The US can steel fist corporations into staying above ground because their assets are holed up in the financial system and the half dozen major banks left in operation. But definitely bitcoin has serious risks to the ability of the US to collect taxes and track spending. Think Canada black market on crack. People show what they’re doing just enough to qualify for healthcare, then back under the surface.

Thus, after losing the ability to print money or borrow indefinitely, the governments ability to collect from their citizens would also be hindered.

And finally, because it undermines the ability of government to track behavior.

Think about how much time is spent by groups like the Fed maintaining huge data collections about what people are up to. They don’t do that for sport. They do that because it lets government plan ahead about how to position themselves. Does the country need more agriculture? More oil? Are people hoarding gold, electronics, food staples, clothing? Is there trouble brewing?

These measures don’t just provide wealth to people sitting somewhere in an agency. They also give a heads up to stewing problems. They provide a knowledge base to gain an edge. The feds have spent the last decade tightening down the financial system for a reason – we’re now at the point where we can track rogue money orders and stamp out terrorist cells trying to collect. That’s not easy, and it’s not possible without a centralized financial system.

Bitcoin hits each of these three sore points, so I can guarantee you if it keeps gaining in popularity, then the FBI will crack down, and do so ruthlessly hard.

So how?

Well, I could see three basic steps being taken to crush this if it keeps getting out of control. They are extreme, and sound fanciful, and most of you will say “no way”. And that’s why I’m worried about them.

1) no more free and open internet. You think the Federal government cares about maintaining a free and open internet? They don’t care. They maintain it that way right now because it doesn’t exactly hinder them and because it’s a politically sensitive subject. In fact, the free and open internet structure we have has proven wonderful adept at striking down our enemies. Because generally speaking, the US political system is still way better than any of the alternatives. Because our leaders just steal a bunch, and lie. They don’t kill a few thousand people when they get caught doing it. And you’re still mostly free to go about your lives.

Plenty of you mistake the government adherence to an open internet platform as meaning they can’t pull it off. And they probably can’t, not totally. Public employees aren’t that good. But much of their reluctance to try has more to do with the tradeoff gain/loss dilemma than them actually not being able to police the internet.

Let’s say some guy steals a hundred dollars worth of media on the internet. Great. So you bust him and fine him and throw him in jail, or just generally set about getting him fired. Now tell me, how much has the government lost in tax receipts from him? How much did they lose setting up the agency in the first place?

But bitcoin takes it all a step further and challenges the ability of the US government to even exist. You hit that level, and the internet will be put on lockdown. With lots of babysitters looking for “sharing”. And maybe not everyone gets caught. But plenty do.

2) Bitcoins declared illegal, with steep punishments for trading them. Now, bitcoin is nothing but a managed exchange system. The programs you’re moving around have no intrinsic value. Few people trade them. It’s all about the accounting mechanisms, the way the purses talk to the system to make sure fake coins aren’t entering circulation, and the fact that (allegedly) someone out there can’t produce a lot more of them.

What are these things worth if you can’t move them? If the government cracked down on silver or gold, I could bunker them for a while, and still know they’ll be there when I get back. Maybe the value will have changed, or the risks, but it’s not like suddenly my ounces will change measurement. What’s a computer program generated by a complicated algorithm worth if the entire underpinning promise – free peer to peer trading – is taken offline for a few weeks or months?

Again, the US has no chance of rounding them all up. But there are things they can do, like…

3) task force created to find and destroy all bitcoin users. There’s allegedly $1 billion worth of bitcoins out there right now. What would I do if I was charged with crushing this thing?

Well, I would take a few billion dollars (a pittance of the US budget), and I would seed it into a few thousand accounts. And then I would get a few thousand agents together, and go out and start trading these things for whatever you lot are buying with them. And I would track you. And I would use the Patriot Act to do it no questions asked. Because as our good friend US Attorney Tompkins said, “you are the scum of the Earth, and have conveniently ceded your rights as a US citizen.” And once I mapped out pretty well who the major players are, I would pick perhaps the top 25th percentile of you – the millionaires – and I would utterly destroy every fabric of your lives, very publicly.

And bitcoin would probably not survive the event.

This is more or less what the founder of bitcoin was afraid of, and eluded to, before he fled and covered his tracks with his anonymity. It’s a shame it is going to play out like this. He seems like a brilliant chap, and I appreciate that. And I wish we lived in a world where these very capitalist, very libertarian ideals of free trade, honesty, and liberty to live out your life without being conscripted to death-by-a-thousand-causes was possible.

But we don’t live in that world. We live in this one; where this clever little open source project threatens the bread and butter of a group of people that you couldn’t pay me to drop my guard around. So the founder and intellectual father of bitcoin escaped. But if you’re going fully dedicated to this thing (and not just laundering money out of the EU), then I can say I see only dark and painful, life ending-equivalence lurking for you on the horizon.

Going Higher

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I don’t know if this is just a bounce or a new leg to the rally. But we’re going up, folks.

The EURUSD is back near 1.275, after bleeding below 1.27 earlier. The collapse of the euro has been the driving force of the move in oil and the correction in the markets. That’s it; the big mystery. The oil glut, the game of “guess demand whack-o-mole”, the sudden fear – nothing next to the euro.

The other excuses being provided are just not that relevant. The data is fine. Demand is shifting around and notoriously sluggish but altogether fine also. Jobs creation is slow, but fine. There’s no real data even reflecting the fears of observers on display yet.

But the euro is an undertow and its move from above 1.4 to below 1.27 did damage. It strengthened the dollar considerably and sent trade out of balance.

With the euro firming up a bit, it’s going to help take some of the edge off. For as long as the EURUSD is lifting I am constructive on stocks and commodities.

Monetary Policy Remains Overwhelmingly Accommodative (And Outlook)

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The fed decision to test the waters with a taper while I was away did surprise me, somewhat. Yet it did not phase me much and so I elected to remain on vacation, silent on the issue.

I would state now in hindsight that a $5B per month taper (with as much as another $5-10B in the works) would still put the Federal Reserve on path to add another ~$800B to its balance sheet in 2014. This remains colossal and would have the Fed assets outstanding at just under $5 Trillion by 2015.

They may very well have tapered by $5B/month just because they were running out of things to buy…(laughter)

If I were to state things that concern me as potential impediments to the US economy and growth, they would list (1) consumer slowdown from budget impacts (pension, healthcare costs, rents/mortgage, increased retirement contributions, etc), (2) foreign existential shocks (EU breakup, Asian crisis, similar collapse that disrupts foreign trade) – where exactly did the EU government debt go and why is it now suddenly not an issue? Who is buying it (ECB, Fed, banking scheme, inter-government trade imbalances, etc)? And what stops non-payment concerns from popping up again in the future? and (3) the election of a Republican majority

But banking solvency just isn’t on that list right now. Neither is inflation, really, although long term prospects of an uncontrollable outbreak of inflation remains a viable possibility. With credit expansion in this country limited to growth of government balance sheets, deflationary pressure is set to commence…until it doesn’t. In the meantime, another ~$1 Trillion of free money to those closest to the trough will keep a major disruption of financial assets here at home as a low probability outcome. Of course, this bodes ill for the “wealth equality” lot, but they’re too dumb to call the system out on that, so we maintain the course.

Concerns aside, I am optimistic. Recessions don’t last forever, and my concerns are outweighed by hope in outlook. I am very long (no margin) and prepared to reap the rewards of economic growth. It’s been almost six years; the system has been on a hyperactive outlook for problems which greatly reduces the likelihood that a real “Black Swan” manages to crop up. It could still happen of course, but with hundreds of thousands of financial professionals calling bubbles as quickly as problems crop up, and a full time central banking staff armed with an unlimited supply of money attacking them at first sight, how exactly is a crisis supposed to materialize from all of this?

The only room for crisis in the US is rampant commodity/asset appreciation, which remains benign. That or an elsewise major shock to the consumer. Financial assets and liquidity issues are covered.

Now, that being said, historically we haven’t had a period longer than 10 years without a recession since at least 1789 (and probably not since long before that either – I just lack records to verify a more robust claim). I’d say the expectation of a correction since the Great Depression is 5-10 years with occasional 1-3 year shocks intermittently. We’re past the small shocks phase, which would put the expectation at right about where we’re at.

These times are unprecedented and the support the Fed is willing to lend the markets (unlike any time in recorded history) makes me think we blow through the averages. I want to say this ship will have the wind to sail to years seven, eight or nine, uninterrupted. We may even match the record holder of 10 or above.

However, it would be foolhardy to doubt another recession will most likely crop up before 2020. The ever growing levels of margin debt to buy equities may well be the first sign of the beginning of the final run before that. Of course it could be nothing.

My belief then is that a long commitment remains the way to go. I have been positively surprised by recent developments that have overridden prior comments on wanting to have a larger cash position by about this time (end of 2013) that I made late last year. However, as gains are taken, a portion should begun to be set aside, starting sometime mid 2014 to early 2015. This should create a reserve build-up of steadily marching intervals (10-20%, with a 1-2% increase every month topping out at around 40-50% of ones account value) sometime around late 2015 to early 2016.

At such time, a second hard look should be had. Earlier and exceptional strength should trigger a reassessment of these statements. Casual to quality growth does not necessarily change them. A major weakness (such as a shock of a GOP majority and fear of monetary policy interference) of course may necessitate a sudden course change.

My most hated places to invest are land/real estate (excluding multifamily or renting derived), oil companies (excluding natural gas predominated), and retail (excluding facilitation to the ultra-rich).

My favorite places center around natural gas production expansion, uranium, coal, multifamily REITs, and I remain interested in holding physical precious metals in a full position in the event an inflation shock from significant expansion in credit hits the economy.

I’m indifferent to the insurance market – especially health insurance. It could swing either way; they crawled into bed with the devil so it’s all political at this point. On the one hand, the entire market is shifting in wild and unpredictable ways. On the other, the feds are rigging the game in the insurance companies favor. Just stay away.

Sure Let’s Default. I’m All In

990 views

Alright, it seems like the benevolent Tea Part folk have decided to share their complete inability to grasp simple concepts with the world, by forced contrition on the populace. It is time to eat our peas. Following the line of Obama’s hatred for those damn jet plane flying 1%-ers, the Tea Party have chosen to one up him, by destroying the 1% in its entirety. An unfortunate and slight side effect may be to destroy the other 99% of the country in the process, but hey…sometimes sacrifices must be born for the good of everyone. So making moves for the ill of everyone is the only logical course of action.

In an attempt to honor Argentina’s dim witted socialist president Fernández de Kirchner for her blood clot, the Tea Party have magnanimously extended a show of us revisiting that countries darkest moment, a point from which it has never recovered: elective default.

Remember that one time the global economy nearly collapsed because a single line of business for US banks bet large sums of money that non-creditworthy citizens would default at abnormally low rates in exchange for paper thin margins on those loans?

Well the entire global economy and all of finance has bet gargantuan sums of money that this non-creditworthy country will never default for no fucking margins.

By all means, how do you think this ends?

Frankly, I don’t care anymore, and am all in. Lay your neck under the axe, and taunt these pussies with all your hatred. See if they have the sack to swing.

What’s the alternative? You can turn all short doubling your money with the end of civilization, just in time to burn it to stay warm? You can barter that paper desperately for some precious metals that aren’t for sale? You can get shot by rioters and have it taken off your corpse?

Because if we actually default, it’ll be to late to go out and prepare. Just think of all the mechanisms that are tied to treasuries. There will be bank failures. And a slow, agonizing process as US spending on interest careens towards $1 trillion annually.

In the meantime, staying in our means would require we basically slash in half one of the following:

The entire defense budget OR
The entire non-defense budget

The point of the matter is that if we default, this place is going to get so screwed up anyway, what does it matter? At some point if the decision were not reversed, the man you know as Cain Hammond Thaler would simply cease to exist. His 9th floor office would be deserted; the only clue that he was ever there at all being an empty safe that used to house his silver and firearms and row upon row of cleaned out bookshelves.

I would simply take up my favorite pocket watch and walking stick, and slip away into the night…never to be heard from again.

Pure Lunacy In The Eurozone

214 views

This morning, Italy announced they are now in the 8th consecutive quarter of economic decline. Do you understand how crazy that is?

In the 9th floor, a cool air drafts around my slippers, sneaking in to touch my feet. The black tea in my mug gives off a warmth to the touch, and the paper between my fingers stains the skin lightly. Dim shadows from the clouds outside the windows provides the need for a lamp on the side table that casts humming of electricity, while I read.

Italy, and all of the EU, are subjecting themselves to needless pain, just so that some dim witted economists and politicians from the 90’s can continue to enjoy the benefits of a legacy!

The thread that holds the eurozone together has slipped and is now strangling the wearer. But these fools won’t cut themselves free from some misplaced fear of tattering the shirt!

Fine; they’ve chosen their coffin. Do you believe, dear man reading over my shoulder, that we are near a bottom, just because numbers came in “better than expected”? Wrong!

These policy wonks have been calling for a bottom, always two quarters out, for two consecutive years now. They fail because they fail to grasp the intricacies of the problem. The debt maturities are breaking against the wall. Each crest that is survived simply marks a trivial point before the next wall of water raises up.

There’s one path for Europa, and that is the destruction of the euro. They may dismantle the debt instruments directing it, or they may dilute it directly. Their cheap side games are distracting from the main choice at hand, which is that the continent cannot survive if it allows itself to be dragged beneath the surface, anchored by the stubborness of those that created this mess in the first place.

As we are now almost three years past the start of the EZ crisis, my fears of Europe derailing US markets is on soft footing. However, even if America should rise above our distant cousins, and leave us sitting, as here in my office, watching curiously as distant spectators, my sympathies for what our brothers are being wrongly subjugated to stand.

There is no reason that a quarter of Spain should be sitting idle. There is no reason that almost a fifth of Portugal should be in despair. There is no reason that over half of Greek youth should be permitted to sink into shambles of anarchy.

There is no reason for any of this, other than the pride of a few.

Bitcoin Fanatics: You’re On Notice

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After seizing the largest Bitcoin exchange’s assets just earlier this month, the Fed’s have now taken down the largest e-currency exchange on the planet, Liberty Reserve.

Read here:

(AP) The U.S. Secret Service have arrested five individuals and seized multiple bank accounts related to a $6 billion money laundering scheme being described by authorities as “staggering” and the largest ever case of international money-laundering.

In a statement, Secret Service officials said authorities in Spain, Costa Rica and New York arrested five people on Friday and seized bank accounts and Internet domains associated with the company Liberty Reserve – a Costa Rica-based website that deals in digital currency and allows transnational online payments and money transfers.

According to the statement from the Secret Service, Liberty Reserve had approximately one million users worldwide with more than 200,000 users in the United States. Overall, the company processed an estimated 55 million separate financial transactions and is believed to have laundered more than $6 billion in criminal proceeds.

Read the description of what Liberty Reserve was, ever so carefully, and then tell me, where is the line between money laundering and creating a currency not sanctioned by a global government?

Don’t answer that; because there isn’t one.

This isn’t some kind of legal game, kids, where the US plays nice with you in court. Take a close look, and realize the the US government treats serial killers, pedophiles, and rapists better than it treats anyone even coming close to impeding the status and legitimacy of the dollar.

Walk into a school and open fire on packs of school children, and you will receive more sympathy from a federal prosecutor than you could ever hope to get from messing around in electronic currencies.

Keep in mind, the feds don’t need to stop you from trading crappy hair cuts for help siding your house. That sort of black market behavior is everywhere all the time. But by forcing compensation in national currencies, that largely clear through a handful of major banks, the current fractional reserve system has given undo and excessive control of the national economy and financial opportunity into a concentrated process – and they aim to keep it that way.

Your Bitcoins have roughly the same dynamics as common IOU’s between friends, because any major attempt to link them into the current financial systems will be met with felony charges and people’s lives getting destroyed. The liquidity premium everyone’s hoping for with these e-currencies will be strangled to death every time it surfaces.

Your One And Only Warning Concerning Bitcoins

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Sipping on the edge of the liquid pooled in this glass, my eyes slip out of focus. And as the 9th floor fades from view, an unclear image is left. It is a premonition – perhaps call it instinct – of what is going to happen if bitcoins continue to gain popularity.

I should say that I see only one way this prevision does not come to pass; if the bitcoin was created by the US government, for some probably lunatic reason, like social experimentation, or beta testing taking the dollar virtual.

Shy of that, those of you buying these little wayward programs are pretty screwed.

I will remind you:

March 18, 2011

STATESVILLE, NC—Bernard von NotHaus, 67, was convicted today by a federal jury of making, possessing, and selling his own coins, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina. Following an eight-day trial and less than two hours of deliberation, von NotHaus, the founder and monetary architect of a currency known as the Liberty Dollar, was found guilty by a jury in Statesville, North Carolina, of making coins resembling and similar to United States coins; of issuing, passing, selling, and possessing Liberty Dollar coins; of issuing and passing Liberty Dollar coins intended for use as current money; and of conspiracy against the United States.

This is what is waiting for you at the end of that tunnel. Whoever the central players are in this game, when the FBI finally becomes aware of it, you are lamb fodder.

Von NotHaus, who remains free on bond, faces a sentence of up to 15 years’ imprisonment on count two of the indictment and a fine of not more than $250,000. Von NotHaus faces a prison sentence of five years and fines of $250,000 on both counts one and three. In addition, the United States is seeking the forfeiture of approximately 16,000 pounds of Liberty Dollar coins and precious metals, currently valued at nearly $7 million. The forfeiture trial, which began today before United States District Court Judge Richard Voorhees, will resume on April 4, 2011 in the federal courthouse in Statesville. Judge Voorhees has not yet set a date for the sentencing of von NotHaus.

Do you think the US government is going to play fair with you? That they’ll just sit by and watch as you play games with their status as the global reserve currency, all because you started doing the same thing with some MP3 files back in the 90’s?

Think again, friend.

“Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism,” U.S. Attorney Tompkins said in announcing the verdict

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I will provide some background here for those of you who aren’t familiar with me. I am not a government advocate, nor do I particularly like that the US political system has control of something as important as the measurement stick of over half of all financial transactions occurring on planet Earth.

I especially dislike that this position allows clowns-in-suits like US Congressmen, government agency employees, State officials, municipalities, banks, people in unique positions of influence, friends of the aforementioned, random con artists,….a half dozen others…to engage in the wildest stupidities at the fringe of their imaginations without immediate and dire consequences.

And I don’t exactly respect the government for its ability to pass, implement, and enforce laws. In fact, I generally get a kick out of most non-violent, non-harmful crime. Example: a guy who owns a fully automatic weapon and regularly posts videos of himself shooting it online.

Hilarious. No one gets hurt. It’s in mock contempt of a half dozen laws. And there’s nothing the government can do about it. Tracking him down would be prohibitively expensive, especially considering that he isn’t actually doing anything.

Another example: buzz sawing cattails. Know what cattails are? Weeds, mostly. But they are apparently sacred weeds, as cutting them down gets the DNR and EPA driving 3 year prison sentencing down your throat if they catch you. Amazingly, that never really stops anyone.

But just because the US government is totally inept at catching most forms of “crime” (and equally bad at conveying what constitutes legitimate need for criminal statuses in the first place…), that shouldn’t trick you into thinking you can get away with anything.

In fact, the US government is an enormous trillion dollar organization, and that’s quite a bit of firepower to have coming your way if you happen to be doing one of the things the government absolutely-will-not-tolerate you doing.

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Now that I’ve explained that, let me point out why bitcoin is such a serious threat to the US government.

First, the US government is completely reliant on its status as the global reserve currency to fund its deficit. Any assault to that status is an immediate game changer as it is, as it would force the US to spend within tax receipts, or else suffer real, actual consequences.

We get away with printing because it all ends up over seas, in accounts, or traded for bonds.

Second, because of the peer to peer method, if left unattended, tax receipts along with most trade reporting would drop off the map. Not from corporations. The US can steel fist corporations into staying above ground because their assets are holed up in the financial system and the half dozen major banks left in operation. But definitely bitcoin has serious risks to the ability of the US to collect taxes and track spending. Think Canada black market on crack. People show what they’re doing just enough to qualify for healthcare, then back under the surface.

Thus, after losing the ability to print money or borrow indefinitely, the governments ability to collect from their citizens would also be hindered.

And finally, because it undermines the ability of government to track behavior.

Think about how much time is spent by groups like the Fed maintaining huge data collections about what people are up to. They don’t do that for sport. They do that because it lets government plan ahead about how to position themselves. Does the country need more agriculture? More oil? Are people hoarding gold, electronics, food staples, clothing? Is there trouble brewing?

These measures don’t just provide wealth to people sitting somewhere in an agency. They also give a heads up to stewing problems. They provide a knowledge base to gain an edge. The feds have spent the last decade tightening down the financial system for a reason – we’re now at the point where we can track rogue money orders and stamp out terrorist cells trying to collect. That’s not easy, and it’s not possible without a centralized financial system.

Bitcoin hits each of these three sore points, so I can guarantee you if it keeps gaining in popularity, then the FBI will crack down, and do so ruthlessly hard.

So how?

Well, I could see three basic steps being taken to crush this if it keeps getting out of control. They are extreme, and sound fanciful, and most of you will say “no way”. And that’s why I’m worried about them.

1) no more free and open internet. You think the Federal government cares about maintaining a free and open internet? They don’t care. They maintain it that way right now because it doesn’t exactly hinder them and because it’s a politically sensitive subject. In fact, the free and open internet structure we have has proven wonderful adept at striking down our enemies. Because generally speaking, the US political system is still way better than any of the alternatives. Because our leaders just steal a bunch, and lie. They don’t kill a few thousand people when they get caught doing it. And you’re still mostly free to go about your lives.

Plenty of you mistake the government adherence to an open internet platform as meaning they can’t pull it off. And they probably can’t, not totally. Public employees aren’t that good. But much of their reluctance to try has more to do with the tradeoff gain/loss dilemma than them actually not being able to police the internet.

Let’s say some guy steals a hundred dollars worth of media on the internet. Great. So you bust him and fine him and throw him in jail, or just generally set about getting him fired. Now tell me, how much has the government lost in tax receipts from him? How much did they lose setting up the agency in the first place?

But bitcoin takes it all a step further and challenges the ability of the US government to even exist. You hit that level, and the internet will be put on lockdown. With lots of babysitters looking for “sharing”. And maybe not everyone gets caught. But plenty do.

2) Bitcoins declared illegal, with steep punishments for trading them. Now, bitcoin is nothing but a managed exchange system. The programs you’re moving around have no intrinsic value. Few people trade them. It’s all about the accounting mechanisms, the way the purses talk to the system to make sure fake coins aren’t entering circulation, and the fact that (allegedly) someone out there can’t produce a lot more of them.

What are these things worth if you can’t move them? If the government cracked down on silver or gold, I could bunker them for a while, and still know they’ll be there when I get back. Maybe the value will have changed, or the risks, but it’s not like suddenly my ounces will change measurement. What’s a computer program generated by a complicated algorithm worth if the entire underpinning promise – free peer to peer trading – is taken offline for a few weeks or months?

Again, the US has no chance of rounding them all up. But there are things they can do, like…

3) task force created to find and destroy all bitcoin users. There’s allegedly $1 billion worth of bitcoins out there right now. What would I do if I was charged with crushing this thing?

Well, I would take a few billion dollars (a pittance of the US budget), and I would seed it into a few thousand accounts. And then I would get a few thousand agents together, and go out and start trading these things for whatever you lot are buying with them. And I would track you. And I would use the Patriot Act to do it no questions asked. Because as our good friend US Attorney Tompkins said, “you are the scum of the Earth, and have conveniently ceded your rights as a US citizen.” And once I mapped out pretty well who the major players are, I would pick perhaps the top 25th percentile of you – the millionaires – and I would utterly destroy every fabric of your lives, very publicly.

And bitcoin would probably not survive the event.

This is more or less what the founder of bitcoin was afraid of, and eluded to, before he fled and covered his tracks with his anonymity. It’s a shame it is going to play out like this. He seems like a brilliant chap, and I appreciate that. And I wish we lived in a world where these very capitalist, very libertarian ideals of free trade, honesty, and liberty to live out your life without being conscripted to death-by-a-thousand-causes was possible.

But we don’t live in that world. We live in this one; where this clever little open source project threatens the bread and butter of a group of people that you couldn’t pay me to drop my guard around. So the founder and intellectual father of bitcoin escaped. But if you’re going fully dedicated to this thing (and not just laundering money out of the EU), then I can say I see only dark and painful, life ending-equivalence lurking for you on the horizon.

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